China says urban rich-poor gap at alarming levels

February 7, 2006

BEIJING (Reuters) – The gap between rich and poor in
China’s cities has reached alarming levels, the main economic
planning agency says in the latest high-level warning of the
inequalities spawned by breakneck growth.

The National Development and Reform Commission (NDRC),
issuing the results of a study on income inequality among urban
residents, said the wealth gap in China’s cities was now
“unreasonable,” the official Xinhua news agency reported.

The poorest fifth of urban residents received only 2.75
percent of total income in urban areas, whereas the richest
fifth commanded 20 times as much, Xinhua said.

The agency’s alarm underlines the fact that the rich-poor
gap, long a source of concern for policy makers worried about
maintaining social stability, is much more than a town-country
divide.

The government’s new five-year plan, due to be approved by
the legislature in March, stresses the importance of creating a
more equal society. But official comments have tended to focus
on the income gap between cities and the countryside.

The NDRC said the country’s overall Gini Coefficient, a
measure of inequality in which a value of zero represents
perfect equality and reading of one means perfect inequality,
stood at around 0.4, the value generally considered to
represent alarming levels of inequality.

It said inequality was steadily growing, and that the Gini
Coefficient could actually be higher, as some income from
high-income groups goes unreported, according to Xinhua.

The World Bank estimates it at 0.45.

The NDRC attributed the growing urban income gap to
differing pay scales among industries, inequality between
employers and employees and increasing numbers of people with
second incomes.

Xinhua cited unnamed NDRC officials as saying the
government would use tougher measures in coming years to
promote equality. It did not specify what those would be.

Premier Wen Jiabao said recently the government would seek
to improve medical care and social welfare, which have provoked
rising complaints from Chinese citizens.

Beijing has already doubled individual income tax
thresholds and scrapped the centuries-old farm tax to try to
ease the burden on the country’s poor, but officials say more
needs to be done.